Deck 5: Product and Service Costing: Job-Order System

Question 1

Process costing would be most applicable for

A) an electronics producer.
B) custom machining.
C) high rise building construction.
D) CPA audits.

Answer 1

A

Question 2

Which of the following would NOT use a process costing system?

A) electrical wire
B) cotton yarn
C) newsprint
D) satellites

Answer 2

D

Question 3

Which of the following is a manufactured product?

A) bungee jumping
B) beauty salon
C) restaurant
D) automobile

Answer 3

D

Question 4

Which of the following firms would make extensive use of a job-order costing?

A) dental and medical services
B) canned foods
C) discount brokers
D) petroleum

Question 5

_______________ is the recognition and recording of costs.

A) Cost accumulation
B) Cost measurement
C) Cost assignment
D) Job order costing

Question 6

Manufacturers producing unique or customized products would employ a(n)

A) process costing system.
B) job-costing system.
C) homogeneous costing system.
D) all of these.

Question 7

Perishability refers to the

A) nonphysical nature of services as opposed to products.
B) fact that production and consumption are inseparable for services.
C) greater chances for variation in the performance of services than in the production of products.
D) fact that services cannot be inventoried but must be consumed when performed.

Question 8

A source document

A) is only an external document.
B) provides transaction data that can be recorded in a database.
C) is only used to record a transaction between an organization and an outside vendor.
D) is only an internal document.

Question 9

In ____________ a single product is produced on a continuous basis.

A) process production
B) job production
C) job-order production
D) both a and c

Question 10

Inseparability refers to the

A) nonphysical nature of services as opposed to products.
B) fact that production and consumption are inseparable for services.
C) greater chances for variation in the performance of services than in the production of products.
D) fact that services cannot be inventoried but must be consumed when performed.

Question 11

Which cost accounting process would be most appropriate for accumulating costs of identical, standardized units?

A) job-order costing
B) process costing
C) normal costing
D) standard costing

Question 12

Heterogeneity refers to the

A) nonphysical nature of services as opposed to products.
B) fact that production and consumption are inseparable for services.
C) greater chances for variation in the performance of services than in the production of products.
D) fact that services cannot be inventoried but must be consumed when performed.

Question 13

Intangibility refers to the

A) nonphysical nature of services as opposed to products.
B) fact that production and consumption are inseparable for services.
C) greater chances for variation in the performance of services than in the production of products.
D) fact that services cannot be inventoried but must be consumed when performed.

Question 14

A pure service organization has

A) no raw materials, no inventories, and a definite separation between the plant and the customer.
B) raw materials, tangible items, and no separation between the plant and the customer.
C) no raw materials, no tangible items, and no separation between the plant and the customer.
D) none of these.

Question 15

Which of the following firms would make extensive use of service costing?

A) auto manufacturer
B) furniture manufacturer
C) auto dealer
D) CPA firm

Question 16

Which of the following is a pure service?

A) bungee jumping
B) beauty salon
C) restaurant
D) software

Question 17

Which of the following costs is usually NOT easily traceable to finished units of product?

A) direct labor
B) manufacturing overhead
C) direct materials
D) all of these

Question 18

Manufacturing overhead consists of all

A) costs other than direct materials.
B) manufacturing costs other than direct materials.
C) costs other than direct materials and direct labor.
D) manufacturing costs other than direct materials and direct labor.

Question 19

Which of the following products would NOT use job-order costing?

A) houses
B) chemicals
C) ships
D) custom-built furniture

Question 20

Homogeneous products refer to

A) products similar in nature.
B) the nonphysical nature of services and opposed to products.
C) great variation in the nature products.
D) products that can be inventoried.

Question 21

A job-order costing process would be most applicable for

A) a food processing plant.
B) a natural gas processing.
C) an airplane manufacturing.
D) fertilizer production.

Question 22

The effect of uniform production levels on unit production costs can be achieved

A) by using a factory overhead rate based on different production levels for each year.
B) by using a factory overhead rate based on selling price.
C) by closing the factory overhead at the end of the accounting period.
D) by using a factory overhead rate based on long-run normal production activity level.

Question 23

The principal difficulty with normal costing is that

A) the unit cost information is not received on a timely basis.
B) it can result in fluctuating per-unit overhead costs.
C) estimated overhead and estimated activity are likely to differ from actual overhead and actual costs, resulting in underapplied or overapplied overhead.
D) there is no difficulty associated with using normal costing.

Question 24

Which of the following costing systems assigns actual costs of materials to inventory?

A) actual costing system
B) normal costing system
C) standard costing system
D) both a and b

Question 25

_______________ is the maximum output that can be realized if everything operates efficiently.

A) Expected activity level
B) Normal activity level
C) Theoretical activity level
D) Practical activity level

Question 26

An actual overhead rate can be calculated

A) at the beginning of the year.
B) at the end of each month.
C) at the beginning of each month.
D) either at the beginning of the year or at the beginning of the month.

Question 27

_______________ is the production level the firm expects to attain for the coming year.

A) Expected activity level
B) Normal activity level
C) Theoretical activity level
D) Practical activity level

Question 28

Unit costs are critical for

A) valuing inventory.
B) determining net income.
C) decisions to enter a new product line.
D) all of these.

Question 29

_______________ is the average activity that a firm experiences in the long term (more than one year).

A) Expected activity level
B) Normal activity level
C) Theoretical activity level
D) Practical activity level

Question 30

Unit cost is important information for which of the following?

A) valuing inventory
B) determining income
C) decision making
D) all of these

Question 31

Normal costing uses which cost in work in process?

A) applied direct materials
B) actual overhead
C) applied overhead
D) budgeted overhead

Question 32

The predetermined overhead rate is usually calculated at the

A) end of each month.
B) beginning of each month.
C) beginning of the year.
D) end of the year.

Question 33

_______________ is the association of production costs with the units produced.

A) Cost accumulation
B) Cost measurement
C) Cost assignment
D) Job-order costing

Question 34

A normal costing system records which costs in work in process?

A) actual direct materials, actual direct labor, actual manufacturing overhead
B) applied direct materials, applied direct labor, applied manufacturing overhead
C) applied materials and labor and actual manufacturing overhead
D) actual materials and labor and applied overhead

Question 35

_______________ is the absolute maximum production activity of a manufacturing firm.

A) Expected activity level
B) Normal activity level
C) Theoretical activity level
D) Practical activity level

Question 36

Unit cost information is needed for

A) costing inventory.
B) financial reporting requirements.
C) decision making.
D) all of these.

Question 37

_______________ involves determining the dollar amounts of direct materials, direct labor, and overhead used in production.

A) Cost accumulation
B) Cost measurement
C) Cost assignment
D) Job order costing

Question 38

Disadvantages of actual costing include

A) actual cost systems cannot provide accurate unit cost information on a timely basis.
B) actual cost systems produce unit costs that fluctuate from period to period.
C) estimates must be used when calculating the actual overhead rate.
D) both a and b.

Question 39

_______________ assign(s) costs by the job.

A) The process costing system
B) The job-order costing system
C) The project costing system
D) Both a and c

Question 40

In developing unit costs, overhead costs should be assigned using activity drivers.Which would be the likely activity driver for a production process using a lathe?

A) units produced
B) direct labor hours
C) machine hours
D) direct materials cost

Question 41

Figure 5 - 2 The Kraig Corporation manufactures custom-made purses.The following data pertains to Job XY5:
Factory overhead is applied using a plant-wide rate based on direct labor hours.Factory overhead was budgeted at $60,000 for the year and the direct labor hours were estimated to be 15,000.Job XY5 consists of 50 units.

-
Refer to Figure 5-2.What is the labor cost per unit for Job XY5?

A) $4
B) $15
C) $0.80
D) $40

Question 42

Figure 5 - 3 Olson Corporation constructs new homes.Assume that Olson uses a job costing system.During May 2011, the following transactions occurred:
Olson purchased $4,500 of lumber on account.
Olson used $3,750 of lumber in production and incurred 50 hours of direct labor hours at $15 per hour.
Depreciation of $1,500 on equipment used to build new houses was recorded.
A house that was completed last period at a cost of $150,000 was sold for $180,000 in cash.

-
Refer to Figure 5-3.The journal entry to record the requisition of lumber for Olson would include a

A) debit to Work-in-Process of $4,500.
B) debit to Materials Inventory of $3,750.
C) credit to Finished Goods of $3,750.
D) debit to Work-in-Process of $3,750.

Question 43

Figure 5 - 3 Olson Corporation constructs new homes.Assume that Olson uses a job costing system.During May 2011, the following transactions occurred:
Olson purchased $4,500 of lumber on account.
Olson used $3,750 of lumber in production and incurred 50 hours of direct labor hours at $15 per hour.
Depreciation of $1,500 on equipment used to build new houses was recorded.
A house that was completed last period at a cost of $150,000 was sold for $180,000 in cash.

-
Refer to Figure 5-3.The journal entry to record labor for Olson would include a

A) debit to Finished Goods of $750.
B) debit to Wages Payable of $750.
C) credit to Finished Goods of $750.
D) debit to Work-in-Process of $750.

Question 44

A journal entry debiting Work-in-Process would normally NOT be accompanied by a credit to

A) Materials Inventory.
B) Finished Goods.
C) Overhead Control.
D) Wages Payable.

Question 45

Figure 5 - 1 The King Corporation manufactures custom-made furniture.The following data pertains to Job X4A:
Factory overhead rate is $22.50 per machine hour.Job X4A consists of 500 units.

-
Refer to Figure 5-1.One-half of Job X4A was sold for $10,000.What is the cost per unit for Job X4A?

A) $18
B) $31.50
C) $27
D) $40.50

Question 46

Figure 5 - 1 The King Corporation manufactures custom-made furniture.The following data pertains to Job X4A:
Factory overhead rate is $22.50 per machine hour.Job X4A consists of 500 units.

-
Refer to Figure 5-1.One-half of Job X4A was sold for $10,000.What is the total amount of costs assigned to Job X4A?

A) $9,000
B) $20,250
C) $13,500
D) $15,750

Question 47

Which of the following items is a basic costing system record in a job-order costing system?

A) materials requisition form
B) job-order cost sheet
C) job time ticket
D) all of these

Question 48

The _______________ serves as the document that identifies each job and accumulates its manufacturing costs.

A) job-order cost sheet
B) control account
C) production order
D) bill of materials

Question 49

Figure 5 - 2 The Kraig Corporation manufactures custom-made purses.The following data pertains to Job XY5:
Factory overhead is applied using a plant-wide rate based on direct labor hours.Factory overhead was budgeted at $60,000 for the year and the direct labor hours were estimated to be 15,000.Job XY5 consists of 50 units.

-
Refer to Figure 5-2.What the total cost assigned to Job XY5?

A) $5,1500
B) $4,400
C) $4,200
D) $4,950

Question 50

A debit to Materials Inventory indicates materials were

A) purchased.
B) requisitioned.
C) put into production.
D) ordered.

Question 51

Figure 5 - 2 The Kraig Corporation manufactures custom-made purses.The following data pertains to Job XY5:
Factory overhead is applied using a plant-wide rate based on direct labor hours.Factory overhead was budgeted at $60,000 for the year and the direct labor hours were estimated to be 15,000.Job XY5 consists of 50 units.

-
Refer to Figure 5-2.What is overhead cost assigned to Job XY5?

A) $200
B) $400
C) $750
D) $1,500

Question 52

A work-in-process inventory file is

A) a file of electronic job-order cost sheets.
B) a file cabinet where work tickets are stored.
C) a file of electronic materials requisitions.
D) none of these.

Question 53

Figure 5 - 2 The Kraig Corporation manufactures custom-made purses.The following data pertains to Job XY5:
Factory overhead is applied using a plant-wide rate based on direct labor hours.Factory overhead was budgeted at $60,000 for the year and the direct labor hours were estimated to be 15,000.Job XY5 consists of 50 units.

-
Refer to Figure 5-2.What is the materials cost per unit for Job XY5?

A) $4
B) $40
C) $80
D) $267

Question 54

Figure 5 - 4 Walter Company uses a job-order costing system to account for product costs.The following information pertains to 2011:
Factory overhead rate is $18 per direct labor hour.

-
Refer to Figure 5-4.What is the total amount debited to Finished Goods Inventory in 2011?

A) $490,000
B) $510,000
C) $450,000
D) $550,000

Question 55

Which of the following costs is NOT included on a job-order cost sheet?

A) direct material costs
B) applied factory overhead costs
C) direct labor costs
D) actual factory overhead costs

Question 56

The collection of all job cost sheets defines a

A) materials file.
B) finished goods file.
C) cost of goods file.
D) work-in-process file.

Question 57

Figure 5 - 4 Walter Company uses a job-order costing system to account for product costs.The following information pertains to 2011:
Factory overhead rate is $18 per direct labor hour.

-
Refer to Figure 5-4.What is the total amount credited to Materials Inventory for Walter in 2011?

A) $480,000
B) $170,000
C) $140,000
D) $110,000

Question 58

Direct labor costs are assigned to individual jobs using a source document known as a

A) job-order cost sheet.
B) payroll check.
C) time sheet.
D) requisition form.

Question 59

A _______________ indicates the type and quantity of each material issued to the factory.

A) control account
B) materials requisition form
C) production list
D) work ticket

Question 60

The cost of direct materials is assigned to a job by the use of a source document known as a

A) job cost sheet.
B) control account.
C) production order.
D) materials requisition form.

Question 61

Total manufacturing-related costs incurred for Miller Company in October for all jobs is as follows: Assuming Miller uses a normal costing system and applies overhead based on a predetermined rate, what is the credit to Overhead Control to close the account at the end of the year?

A) $900
B) $350
C) $1,450
D) $1,650

Question 62

For a manufacturer, the three inventory accounts on the balance sheet are

A) Materials, Finished Goods, and Cost of Goods Sold.
B) Materials, Overhead, and Cost of Goods Sold.
C) Materials, Direct Labor, and Overhead.
D) Materials, Work-in-Process, and Finished Goods.

Question 63

When normal costing is used, actual overhead costs are

A) recorded in the work-in-process account.
B) recorded in the overhead control account.
C) recorded in the finished goods account.
D) not recorded.

Question 64

Figure 5-5 Wright Corporation had the following information available for December 2011:
Factory overhead rate is 150 percent of direct labor costs.
Job cost sheets had the following balances:
Jobs Z3 and Z4 were not completed at the end of December.

-
Refer to Figure 5-5.What is the cost of goods finished during December for Wright Corporation?

A) $85,000
B) $87,500
C) $56,250
D) $53,750

Question 65

Figure 5-7 The following information is available pertaining to the Production Division:


-Refer to Figure 5-7.Based on departmental overhead rates, what is the cost of Job 4X5? Departmental overhead notes for the Mixing Department are based on direct labor hours, while departmental overhead rates for the Finishing Department are based on machine hours.

A) $31,250
B) $8,750
C) $2,000
D) $1,250

Question 66

Figure 5-7 The following information is available pertaining to the Production Division:


-Refer to Figure 5-7.What is the plantwide overhead rate based on direct labor hours?

A) $3.00
B) $1.50
C) $9.00
D) $1.00

Question 67

On April 9, 2011, Job XX4 was completed.The job cost sheet showed a total of $4,000 in direct materials and $6,000 in direct labor at a rate of $20 per direct labor hour.Factory overhead is applied at $30 per direct labor hour.The debit to Finished Goods Inventory to record the completion of Job XX4 is

A) $13,000.
B) $9,000.
C) $4,000.
D) $19,000.

Question 68

Russell Company has the following data pertaining to 2011: Factory overhead rate is 125 percent of direct labor costs.
What is the ending materials inventory balance for Russell in 2011?

A) $50,000
B) $62,500
C) $12,500
D) $37,500

Question 69

Figure 5 - 6 In the Mains Company, the following Job cards were totaled at the end of the month:
Job 243 $5,750
Job 244 $4,980
Job 245 $3,675
Job 246 $4,250
Job 247 $5,100
Job 248 $3,800
Jobs 243 and 244 were in Finished Goods Inventory at the beginning of the month.Jobs 245 and 246 were in Work-in-process at the beginning of the month.Jobs 247 and 248 were started during the month.At the end of the month, Jobs 243 and 247 were sent to customers; jobs 245, 247, and 248 were completed and sent to finished goods.

-
Refer to Figure 5-6.What is the cost of goods sold for the month?

A) $10,730
B) $10,850
C) $12,575
D) none of these

Question 70

Figure 5 - 6 In the Mains Company, the following Job cards were totaled at the end of the month:
Job 243 $5,750
Job 244 $4,980
Job 245 $3,675
Job 246 $4,250
Job 247 $5,100
Job 248 $3,800
Jobs 243 and 244 were in Finished Goods Inventory at the beginning of the month.Jobs 245 and 246 were in Work-in-process at the beginning of the month.Jobs 247 and 248 were started during the month.At the end of the month, Jobs 243 and 247 were sent to customers; jobs 245, 247, and 248 were completed and sent to finished goods.

-
Refer to Figure 5-6.What is the cost of goods manufactured for the month?

A) $10,730
B) $10,850
C) $12,575
D) none of these

Question 71

In a traditional enterprise, the flow of costs through the system is

A) materials inventory, work-in-process inventory, finished goods inventory, cost of goods sold.
B) materials inventory, work-in-process inventory, cost of goods sold, finished goods inventory.
C) work-in-process inventory, materials inventory, finished goods inventory, cost of goods sold.
D) work-in-process inventory, materials inventory, finished goods.

Question 72

Figure 5-7 The following information is available pertaining to the Production Division:


- Refer to Figure 5-7.What is the overhead rate for the Finishing Department based on machine hours?

A) $9.00
B) $3.00
C) $2.25
D) $1.00

Question 73

Figure 5-5 Wright Corporation had the following information available for December 2011:
Factory overhead rate is 150 percent of direct labor costs.
Job cost sheets had the following balances:
Jobs Z3 and Z4 were not completed at the end of December.

-
Refer to Figure 5-5.What is the balance in Work-in-Process for Wright at the end of December?

A) $85,000
B) $87,500
C) $56,250
D) $53,750

Question 74

If there is a debit balance in overhead control, that implies

A) actual overhead costs exceed overhead applied.
B) applied overhead exceeds actual overhead.
C) actual overhead has not been closed to cost of goods sold.
D) none of these.

Question 75

Figure 5-7 The following information is available pertaining to the Production Division:


- Refer to Figure 5-7.Using the plantwide overhead rate based on direct labor hours what is the cost of Job 4X5?

A) $1,250
B) $2,000
C) $8,750
D) $31,250

Question 76

Carlson Company uses a predetermined rate to apply overhead.At the beginning of the year, Carlson estimated its overhead costs at $240,000, direct labor hours at 40,000, and machine hours at 10,000.Actual overhead costs incurred were $249,280, actual direct labor hours were 41,000, and actual machine hours were 11,000. If the predetermined overhead rate is based on machine hours, what is the total amount credited to the factory overhead account for the year for Carlson?

A) $249,280
B) $246,000
C) $240,000
D) $264,000

Question 77

Which of the following transactions in a job-order costing system requires the procedure of merely moving a job-order cost sheet from one file to another?

A) applying factory overhead to jobs
B) closing overapplied factory overhead
C) delivering a completed job to a customer
D) moving the job from one production department to another

Question 78

Smith Company has the following selected debit balance accounts at the end of the current year: Work-in-Process, $25,000; Finished Goods, $12,500; Cost of Goods Sold, $37,500; and Factory Overhead, $6,000.The pro-rated amount charged to Cost of Goods Sold for factory overhead will be

A) $25,000.
B) $3,000.
C) $37,500.
D) $6,000.

Question 79

Under normal costing, which of the following statements is true regarding factory overhead?

A) The balance in factory overhead at the end of the accounting period is closed.
B) Different overhead rates are used for different quantities of predicted activity.
C) The balance in factory overhead at the end of the accounting period is kept open.
D) The immaterial balance in factory overhead at the end of the accounting period is allocated to the cost of goods sold and inventory accounts.

Question 80

Figure 5 - 6 In the Mains Company, the following Job cards were totaled at the end of the month:
Job 243 $5,750
Job 244 $4,980
Job 245 $3,675
Job 246 $4,250
Job 247 $5,100
Job 248 $3,800
Jobs 243 and 244 were in Finished Goods Inventory at the beginning of the month.Jobs 245 and 246 were in Work-in-process at the beginning of the month.Jobs 247 and 248 were started during the month.At the end of the month, Jobs 243 and 247 were sent to customers; jobs 245, 247, and 248 were completed and sent to finished goods.

-
Refer to Figure 5-6.What is the ending work-in-process inventory for the month?

A) $10,730
B) $4,250
C) $12,575
D) none of these